No to unbundling FCI

A totally novel method needed to procure and disburse food

Unbundling the Food Corporation of India (FCI) by hiving it into three separate entities for procurement, storage and distribution of foodgrain seems prima facie an unsound proposition. It would lead to a multiplicity of food handling agencies; the proliferation of bureaucracy would cause procedural delays and poor coordination. Administrative expenses, which are already high and bloating the food subsidy bill, would tend to soar further after the FCI's reorganisation. Accountability, too, is likely to be difficult; each organisation will tend to pass the buck to the others if delivery is poor. Besides, there is no warranty that the new outfits would not carry their past baggage of deficiencies along, or that the new system as a whole would be more efficient than the existing one.

The idea of revamping and restructuring the FCI was first suggested when the National Democratic Alliance was last in power, but was shelved for want of consensus. It was subsequently revived and repackaged as "unbundling" of the FCI in 2011, in the report of the committee of chief ministers on food inflation headed by Narendra Modi. It found no takers then, too. It went into Mr Modi's election manifesto and now is reportedly part of his programme as prime minister. Certainly, the need to revamp the malfunctioning public distribution system (PDS) and make it more efficient and leak-proof cannot be disregarded. Extension of its coverage to two-thirds of the population, as promised under the food security law, would entail the procurement of huge quantities of foodgrain - at least 62 million tonnes - as well as their safe upkeep and smooth delivery to beneficiaries across the country. This is a formidable task which the Centre may find hard to shoulder without substantial involvement of the states.

But, even under the existing food management system, much of the procurement and distribution work is handled by state agencies. The Central Warehousing Corporation (CWC) also exists, hiring out most of its godowns to the FCI. It is, therefore, possible to run the PDS with a far smaller food management body than the existing FCI, by outsourcing grain procurement entirely to the states and handing over storage work to the CWC. The states would be happy to do so as it results in the transfer of more Central resources to them. Some states, notably Madhya Pradesh and Rajasthan, are in fact already going all out to increase grain procurement and therefore revenue, even offering bonuses on top of the minimum support prices.

Thus, instead of creating three new monolithic organisations in place of the white elephant that the FCI has become, it would be better to conceive a totally novel system to efficiently run the public distribution system. The twin objectives of providing remunerative prices to grain-growers and supplying staple foods to consumers at subsidised prices need not be sacrificed while doing so.